How to make Open Innovation work

Friday, August 26, 2016

For the past 7 years, I have been visiting Japan each year to work with colleagues in Kyoto on various projects relating to the management of technology, 3D printing and open innovation. Back in 2009, we held an event at Doshisha University with members of the local business community that discussed, among other topics, open innovation. Yesterday, at the same location, a forum was organised by Professor Toshiro Kita to bring together Japanese firms that are implementing open innovation. Listening to the talks and discussion it was very clear that much seems to have changed since the start of the decade in terms of attitudes and actions relating to open innovation. This post provides some quick initial reflections on 'then and now', with a more detailed summary of the actual event to appear on the Doshisha Business School website shortly (along with the speakers' presentations).

Then

At a general level, there was interest from companies in open innovation with much reference was made to the structure of corporate systems in Japan - in many ways closed to the outside, but open within keiretsu structures. Comment would made to the role of corporate spin-offs as one open innovation-type strategy that was well-suited to the Japanese corporate context. This was also the era when the 'Galapagos Effect' was much in the business news, reflecting one perceived consequence of the open-yet-closed environment. The discussions would also often cover the challenges facing start-ups, and the weakness of the entrepreneurial support ecosystem when compared to Silicon Valley, Cambridge, and elsewhere. When visiting national and regional government agencies, presentations and report would frequently make explicit reference to open innovation and the need for this to be supported, though discussion of implementation activities tended to be rather opaque. The role of universities and the need to encourage higher levels of interaction between industry and academia was also a popular talking point. Overall the attitude seemed to be one of 'This is interesting, but we are not yet quite sure how this will work in Japan'.

Now

The recent publication of the Open Innovation White Paper by NEDO and the Japan Open Innovation Council is an important milestone. The differences in both attitude and activity on from companies is also very noticeable - at least from the sample of attendees yesterday. Among the +85 attendees at the event, the number of business cards that contain an explicitly open innovation-related job title was very high. The presentations given by speakers from Omron Ventures, Daikin, Horiba, Screen Holdings and Osaka Gas revealed a high level of activity (e.g. Daikin spending US$300m on a new open innovation facility) and Horiba acquiring MIRA in the UK) and sophisticated reflection on emerging issues. This last point was perhaps particularly revealing as the willingness to discuss both success as well as failure can be an important reflection of an organisation's true attitude to open innovation. However, in term of results achieved through open innovation, the most common response to questions relating to this was: 'It is too early to say'.

What are the emerging issues?

The final workshop session highlighted areas where more understanding is needed to improve the implementation of open innovation in a Japanese context. Discussion points included:

How can open innovation be managed - and activities with all partners coordinated - along different value chains?

What is needed to develop open innovation regional support ecosystems?

How do you develop specific regional specialisations for open innovation? Is it necessary?

How do you manage open innovation systems within one organisation that aim both to strengthen the core business as well as explore new business areas?

What are the capabilities needed to make a strong open innovation team?

Once you have developed a strong open innovation team, how can you ensure that they stay within your organisation?

The 'after-party'/飲み会 discussions also provided clear evidence of the increasing level of maturity of open innovation attitudes in Japan, with talk of the launch of an open innovation community of practice, and the explicit need for organisations to be willing to share experiences and learn from one another. I am really looking forward to being part of these on-going discussions, and seeing how lessons can be shared within and beyond Japan.

Monday, March 28, 2016

In 2006, we started publishing the results of our research
on how to make ‘asymmetric’ partnerships work. Our work was focused on the
asymmetry of company size, age, and technical and commercial maturity between
two organisations seeking to work together on an innovation project, i.e. a
situation exemplified by technology-based start-ups seeking to work with large,
long-established firms. This research
had been kick-started by first-hand observations of the challenges faced by
technology start-ups within the Cambridge high-tech cluster that were seeking
to partner with large, mature firms. We
took an engaged scholarship approach [1] to the work, and the results were disseminated via academic conference papers [2-4]
and journal articles [5, 6],
and a series of events and other practitioner-focused outputs [7-9].

Nearly 10 years on, it is interesting to observe whether things
have changed. Firstly, there has been
the diffusion, maturing and refinement of open innovation as a concept [10-15],
and widespread recognition by larger firms of the implementation challenges
that need to be overcome. When we began our work, many multinationals viewed
working with start-ups as a novelty, and approached such collaborations with
(what they admitted themselves) was a pretty high level of naivety. It seemed
so simple: big companies were being
driven to – or were choosing to – open up their innovation activities and draw
upon a wider range of sources of innovative ideas; start-ups with innovative
ideas were lacking the resources they needed for commercialisation, and so collaboration
seemed like an obvious and effective strategy. Our research showed the
implementation of such an approach to be much more complex and risky for both
parties than anticipated [6]. Today, there seems to be a greater level of
awareness on the part of larger firms of the challenges of making such
asymmetric partnerships work. Attitudes
to working with start-ups seem to have followed the shape of a hype cycle[i]:
huge enthusiasm coupled with unrealistic and then unmet expectations,
re-thinking, leading to a more balanced set of exploration (i.e. looking for
new ideas) and exploitation (i.e. creating and capturing value from current
ideas) activities. Organisationally and
operationally, the set-up and management of these partnerships has moved from
being a predominantly corporate venturing-focused activity (and thus affected
the ups and downs of senior management enthusiasm that mirrors the wider venture
capital investment cycle) to something more integrated with R&D, procurement,
legal, and dedicated open innovation teams. As a somewhat peripheral issue, it has also
been interesting to observe the affect how the increased digitization and
servitization of technologies seems to have enabled partnerships: smaller firms providing various digital
technologies (especially mobile apps) to add more customer benefit based around
the core technology.

Secondly, have start-up firms become more proficient than
their predecessors at setting up and managing partnerships with larger firms? This
is very hard to judge, but given that their potential partners now seem to have
more sophisticated mechanisms for engaging with them, it could be expected that
more start-ups will be forming such partnerships and consequently refining
their own partnership skills. Emerging
concepts in entrepreneurship - –such as
the Lean Start-up methodology [16]
– may also being playing a role (though
the complexity and slowness of setting up partnerships may be in conflict with
the minimal viable product / pivot mindset).
There may also be differences in
partnership activities between start-ups focused on the commercialisation of a
physical product, as opposed to those based on software. The partnership
challenges facing a start-up focused on the commercialisation, for example, of
advanced materials [17, 18]
compared to one focused on app development [19]
are both significant, share some similarities but also have some major differences.

Thirdly, there is the evolving role of clusters. Research on
this topic shows that the location of the start-up may also impact their
partnership capabilities [20, 21]. For a region such as Cambridge, the steady
influx of large companies may have encouraged and made such partnerships more
visible. Having large firms locally
whose staff are actively engaged with the networking activities reduces at
least some of the transaction costs of partnership formation and management. This is linked to another issue; that of the
ability of the start-up to recruit talent from large companies and the
willingness of experienced managers to join start-ups. This is in turn is underpinned
by a range of factors, including both the actual and perceived impact that
start-ups can have on changing industrial structures (e.g. everyone wants to
join the next Uber).

Finally, there is the role of open innovation intermediary
activities and actors that has become more common in the past ten
years. These range from platforms for matching ideas
and needs (e.g. Innocentive, NineSigma, et al.) through to consultancy services
targeted specifically at supporting open innovation [22].

These four issues highlight the changing context within
which 'asymmetric' partnerships are formed and may be leading to more firms
developing the capability to establish and manage these types of partnerships.

2. Minshall,
T.H.W., et al. Development of a
management guide for partnerships between technology-based start-ups and
established firms. in International
Association for the Management of Technology (IAMOT) EuroMOT Conference 2006,
September 10 - 12. 2006. Aston Business School, Aston University,
Birmingham, U.K.

3. Minshall,
T.H.W., L. Mortara, and J.J. Napp. Implementing
Open Innovation: Challenges in Linking Strategic and Operational Factors for
HTSFs Working with Large Firms. in 15th
High Tech Small Firms Conference, 14-15 June 2007. 2007. Manchester
Business School, Manchester, UK.

15. Mortara,
L. and T. Minshall, Patterns of
implementation of open innovation in multinational corporations in New Frontiers in Open Innovation, H.
Chesbrough, W. Vanhaverbeke, and J. West, Editors. 2014, Oxford University
Press.

20. Weiss,
D. and T. Minshall, New perspectives on
Open Innovation: The role of relative proximity on open innovation
implementation in UK high-tech SMEs, in 26th
International Conference on Manufacturing Research, 11-13 September 2012.
2012: Aston Business School, Birmingham, UK.

21. Weiss,
D. and T.H.W. Minshall, Negative effects
of relative proximity and absolute geography on open innovation practices in
high-tech SMEs in the UK, in 7th IEEE
International Conference on the Management of Innovation and Technology (ICMIT
2014) 23-25 September. 2014, Received 'Best Paper Award': Singapore.

Shell: We heard interesting examples of how start-ups are implementing business models in the world of transport, including Filld (fuel delivery service) and MetroMile (pay-per-mile insurance). During one of the many fruitful informal discussions, examples of interesting 'non-traditional' innovations from Shell emerged: these included 'Fill Up and Go' and the trial of an app that used the sensors in drivers' smartphones to sense how they were driving, and reward economical behaviour with reward points.

Bosch: For IoT innovations in a firm such as Bosch, one challenge is bringing together and aligning the different worlds of what were described as the 'Machine guys' with the 'Internet guys'. Bosch use a very structured process to explore IoT opportunities (solution sketches, mapping value drivers >value proposition >value delivery, stakeholder network diagrams etc.)

JLR: Innovation in automotive has been largely incremental for many years. Disruption requires a catalyst, and one example of that is the explosion of mobile communication technologies, and the way in which these are now so deeply integrated into cars. Vehicles now contain a huge range of sophisticated ICT systems that are an innovation 'gift' for car makers to exploit. For example, JLR can now offer a range of features that are enabled by the connection between the car and the driver's smartphone.

Monday, September 14, 2015

This paper attempts to deepen understanding of the relationship between open innovation (OI) and firm performance in small and medium-sized enterprises (SMEs). Based on survey data from 306 Korean innovative SMEs, the results of this study show that: (1) broad and intensive engagement in OI and cooperation with external partners are positively associated with firm performance; (2) technology and market-oriented OI modes (Joint R&D, user involvement and open sourcing), involving relatively low level of changes, can positively contribute to performance enhancement; and (3) innovative SMEs benefit from working with non-competing partners, such as customers, consultancy/intermediaries and public research institutes. This work has broadened the evidence available on SMEs’ OI adoption and has proposed a new way to study OI adoption and implementation.Click here to download full paper.

Sunday, September 13, 2015

"The Garwood Center for Corporate Innovation, Haas School of Business, University of California, Berkeley, is pleased to announce its 2nd Annual World Open Innovation Conference. The 1st Annual World Open Innovation Conference was a “sold-out” event!
Engage with Open Innovation practitioners, and dialogue with world-renowned Open Innovation experts who share relevant research and expertise in their industry. Gain insight into the prospective value for both industry leaders and academic scholars. Learn how firms organize and incorporate Open Innovation services into their structure. National and international leading organizations will share their Open Innovation challenges with academic colleagues to foster stronger connections between business practice and academia. Academic scholars are invited to present their own research on the topic, and consider how their findings might improve and transform the performance of real organizations. One of the conference’s unique features is that it aims to address and bridge the gaps between academic research and the practical execution of Open Innovation. Join us at the World Open Innovation Conference for an opportunity to network and engage with Open Innovation practitioners."

Sunday, February 8, 2015

Earlier this week, planning permission was granted for AstraZeneca's new Global R&D Centre and Corporate Headquarters at the Cambridge Biomedical Campus. The initial announcement of this plan in 2013 attracted great interest and excitement as it represented a major coup for the region. This seemed to show that Cambridge can not only build £bn companies on the back of its strengths in science and technology, but it can also attract significant direct corporate investment.
Several major corporations have had R&D facilities in Cambridge for many years (Philips, Rolls-Royce, Microsoft, Nokia, to name a few) but the scale of the AstraZeneca facility - £330m investment, 2,000 employees - dwarfs many of the earlier investments by large organisations.

The site of the planned AstraZeneca facility at the
Cambridge Biomedical Campus

But there are some potential downsides to this move. There is something of a Catch-22 problem: people want to work and live in Cambridge because of the perceived high quality of life. But the sudden arrival of 2,000 new workers (plus dependents probably doubling that number) in a city with a population of 124,000 may start to put strains on the infrastructure (especially transport and housing), thus lowering the very quality of life that made the move attractive in the first place.

As the Cambridge Technopole continues to build upon its success with more successful start-ups and more inwards investment (most recently from Apple and Amazon), the importance of the joined-up long-term strategy for the city's development within the wider region becomes ever more important.